Credit card debt hits 1 trillion! How much do you owe?

[Shoedog112]

4 hours ago, chitownguy said:

Having zero balances on your credit cards or paying them in full each month will not hurt your credit score.  It can actually increase your score.  One of the factors used in computing your score is your credit card use percentage.  Total debt on all your cards divided by the total credit limit on all cards.  A high percentage will lower your score.  Having no balance or paying them off lowers your use percentage.

Thanks for the explanation. Makes sense. When you refer to the term “debt”, are you referring to “total charges”, or “debt, as in balance”? 
 

My average annual charges are between $30,000-$32,000 a year. I use my rewards card for almost everything. My credit limit is $35,000. Monthly balance I have been leaving about $1000 a month?

Edited January 7, 2024 by Shoedog112

[Luv2play]

1 minute ago, Shoedog112 said:

Thanks for the explanation. Makes sense. When you refer to the term “debt”, are you referring to “total charges”, or “debt, as in balance”? 
 

My average annual charges are between $30,000-$32,000 a year. I use my rewards card for almost everything. My credit limit is $35,000. Monthly balance I have been leaving about $1000 a month?

As I pointed out above we should be talking about balances at the end of each month, not monthly charges. If you leave $1000 on your card regularly each month you are racking up interest expenses. If you can you should pay off the entire amount of your monthly charges at the end of each month. 
 

 

[+ BobPS]

I have an American Express cash preferred credit card among others. I use the Amex card to purchase virtually all my groceries and liquor wine etc. at grocery stores because I get 6% back.Yearly,  the savings add up to well over the $95 a year I pay for the card. I pay it in full every month.

Edited January 8, 2024 by BobPS
Clarification

[+ jessmapex]

I have zero debts. I use credit cards to accumulate miles or cash back. Autopay pays off full balance every month.

My credit score went down because i had no loans. So when i purchased my last car, I financed half of it despite having the cash. Paid it off just to demonstrate to the credit agencies i am able take on a loan and pay it back. That added 5-10 points to my credit score. 

Edited January 8, 2024 by jessmapex

[chitownguy]

17 hours ago, Shoedog112 said:

Thanks for the explanation. Makes sense. When you refer to the term “debt”, are you referring to “total charges”, or “debt, as in balance”? 
 

My average annual charges are between $30,000-$32,000 a year. I use my rewards card for almost everything. My credit limit is $35,000. Monthly balance I have been leaving about $1000 a month?

I am referring to the total current balance on yours cards at the time your score is calculated.  Credit companies usually report your current balance and credit limit to the credit bureaus once a month on the closing date of your account.

[Thelatin]

I gave a card to one of my long term providers for “emergencies”.  Amazing how his definition of an emergency is different than mine lol.   He always pays it off on his own, but not great for my credit score.  I like to keep it up at 850, which he doesn’t understand. 

[Shoedog112]

On 1/7/2024 at 7:44 PM, jessmapex said:

I have zero debts. I use credit cards to accumulate miles or cash back. Autopay pays off full balance every month.

My credit score went down because i had no loans. So when i purchased my last car, I financed half of it despite having the cash. Paid it off just to demonstrate to the credit agencies i am able take on a loan and pay it back. That added 5-10 points to my credit score. 

I’m thinking of doing the same thing when I purchase a new car in a few months. Did you pay the balance off immediately, or follow the payment plan?

[+ jessmapex]

26 minutes ago, Shoedog112 said:

Did you pay the balance off immediately, or follow the payment plan?

I followed the payment plan.

[Peter Eater]

On 1/7/2024 at 12:47 PM, Luv2play said:

Ironically these latter types of debt are carried by the poorest in society. 

Agreed, although I think the situation is less “ironic” than intentional. The poor have the fewest options, so they’re ripe for exploitation. The payday loan industry was designed to exploit - and should be banned. It’s usury!

[+ augustus]

Here's a recent article from CNBC about credit card debt.  What is amazing is the average interest rate charged.   22.77% !

 

43% of Americans with credit card debt say it's due to emergency expenses—here's how much it's costing them

WWW.CNBC.COM

---

Nearly half of Americans are using their credit cards as an emergency fund, even though it costs them in interest.

 

[handiacefailure]

Zero debt here.   But charge every purchase I can for the awards/points.  I have been able to maintain Delta thanks to AmEx and have a lot of miles and points.   But I pay the balance in ful (and try to pay the balance before the due date so it closes with a zero balance for credit reporting) and use my credit cards as a convenience not necessity. 

[TonyDown]

I read an article linked on Yahoo Finance today that Citi was planning to cut thousands of jobs.  The article reported Citi had a loss.   My initial reaction was how could that be possible with the high interest they charge on credit cards.  Thus this thread caught my interest.

The average credit card debt reported in the article did not seem too astounding compared to all of the credit card debt horror stories one hears about.  So, I wonder if the median debt metric is quite a bit higher than the average.

That said, I pay off my credit card balances every week.  My car I bought used at Enterprise, with cash.

I basically keep no debt.

[Luv2play]

On 1/10/2024 at 1:53 PM, augustus said:

Here's a recent article from CNBC about credit card debt.  What is amazing is the average interest rate charged.   22.77% !

 

43% of Americans with credit card debt say it's due to emergency expenses—here's how much it's costing them

WWW.CNBC.COM

---

Nearly half of Americans are using their credit cards as an emergency fund, even though it costs them in interest.

 

I don’t find the average rate of 22 percent out of line. That’s what I said in my post above. That’s here in Canada but I would expect the US would be much the same. I’m talking about Mastercard Visa etc the mainstream  card companies. 

[Luv2play]

19 hours ago, TonyDown said:

I read an article linked on Yahoo Finance today that Citi was planning to cut thousands of jobs.  The article reported Citi had a loss.   My initial reaction was how could that be possible with the high interest they charge on credit cards.  Thus this thread caught my interest.

The average credit card debt reported in the article did not seem too astounding compared to all of the credit card debt horror stories one hears about.  So, I wonder if the median debt metric is quite a bit higher than the average.

That said, I pay off my credit card balances every week.  My car I bought used at Enterprise, with cash.

I basically keep no debt.

Every week???

[Shoedog112]

Is interest calculated on the month end balance that posts at the billing cycle, or your daily balance during the month? 

[mike carey]

45 minutes ago, Shoedog112 said:

Is interest calculated on the month end balance that posts at the billing cycle, or your daily balance during the month? 

Different cards may apply interest in different ways, but my understanding of the method that applies in general to cards in Australia is that the due date, which is at the end of the interest-free period, is the decision point. If you do not pay the balance by then, interest is charged on the amount owing from the date that each charge was debited to your account, so that could be up to 55 days' interest on amounts owing. Interest after that date is then charged on the daily outstanding balance, including any new charges incurred, until the debt is paid down.

[chitownguy]

12 hours ago, Shoedog112 said:

Is interest calculated on the month end balance that posts at the billing cycle, or your daily balance during the month? 

Most credit cards use an average daily balance method to calculate the interest.  The total balance on the card for each day in the billing period is divided by the number of days in the billing period.  This is the average daily balance that the interest rate is applied to calculate interest charged that month.

Edited January 14, 2024 by chitownguy

[Shoedog112]

6 minutes ago, chitownguy said:

Most credit cards use an average daily balance method to calculate the interest.  The total balance on the card for each day in the billing period is divided by the number of days in the billing period.  This is the average daily balance that the interest rate is applied to calculate interest charged that month.

Thank you, that makes sense. So even if you pay the balance off by the due date, there will still be interest incurred because there was a balance carried during the billing period? 

[chitownguy]

1 hour ago, Shoedog112 said:

Thank you, that makes sense. So even if you pay the balance off by the due date, there will still be interest incurred because there was a balance carried during the billing period? 

If the beginning balance on the current month's statement is zero or you paid the prior month balance in full by the due date, no interest would be charged for the current month.

Edited January 14, 2024 by chitownguy

[spidir]

I'm grateful to those that loaned me money to meet my needs or desires. Those instances decreased over time as I accumulated wealth. I wish that I could borrow time as easily as money. 🤑

[+ sniper]

On 1/6/2024 at 12:22 PM, Charlie said:

I used to often find that someone wouldn't accept an Amex card as payment, so I always ask before presenting a card, but it has been a long time since anyone has turned down my offer of my Amex card for anything.

I think the other credit cards have jacked up their merchant fees and the gap is smaller than it was in years past.

[+ tassojunior]

I churn ff card bonuses (all paid off immediately) 7 million airline points and 3 million hotel points. ("worth" $131K- nice hobby in cards). I have a drawer full of closed cards and maybe 2 dozen open.  Credit score very high because of low balance-to-credit line %. 0 debt, paid mortgage. huge equity, smaller savings, nice income and retirement....................low bills until the medical bills start as older.

Then healthcare will take all unless I'm lucky enough to die first. 

 

But for now FF credit cards let me travel well. 

[+ BenjaminNicholas]

Zero cc debt with $300k+ of open credit.

I played the churn game for years and have now settled into a handful of cards that give me the benefits I use most.

I'll only keep a balance going if the card offers me 0%.  Otherwise, it's paid off monthly.

[Shoedog112]

On 1/22/2024 at 4:59 PM, BenjaminNicholas said:

Zero cc debt with $300k+ of open credit.

I played the churn game for years and have now settled into a handful of cards that give me the benefits I use most.

I'll only keep a balance going if the card offers me 0%.  Otherwise, it's paid off monthly.

What is the churn game? Is that when you transfer balances and get rewarded?

[+ BenjaminNicholas]

1 hour ago, Shoedog112 said:

What is the churn game? Is that when you transfer balances and get rewarded?

First, have a high FICO score to get the best CC offers.  It could be points, miles, cashback or a combo.

Get the card and satisfy the terms of the deal.  Likely a minimum spend in a certain number of months.

Churn the card by paying it to zero and shelving it, or just cancel if you don't think there will be a reward clawback.

There are a ton of CC blogs and groups out there that go into insane, minute detail.  Every card.  Every offer.  Everything.  Even how to snag more points/miles/rewards through retention agents.  These are the people who likely have a spreadsheet for everything in their lives.  

I don't fault them:  I just don't have the willpower to do the same.